Mr ZAMMIT (11:44 AM) —This change to the superannuation industry through the workplace agreements will allow employers to meet their choice obligations through the use of both formal agreements—that is, the Australian workplace agreements and certified agreements—and informal agreements where an employee is able to individually nominate the choice of their fund, giving the employer the chance to agree to that nomination. The current system rarely allows employees the choice of which super fund their employer's compulsory superannuation contributions are distributed to. The proposal to enable employees the choice of funds was announced in the 1997-98 budget, and the introduction of choice of superannuation funds provides employees with greater control and greater flexibility. This also requires greater personal and self-responsibility.

Employees will need to be able to assess which funds are most appropriate and best suited to their requirements and will need to recognise, distinguish and differentiate marketing and sales pitches that will undoubtedly become common once this choice is made formal. The Taxation Laws Amendment Bill (No. 7) 1997 will be of great benefit to people who have had to move from one place of employment to another and, as we all know, Australians are changing jobs at a rate never seen before and also moving from city to city at a rate never seen before. There are many people, as I said, in that position who consequently have employer contributions held in many and various accounts and, since their superannuation contributions are managed by different funds, the employee incurs losses in their retirement funds as a result of the varying fees and charges associated with the management of the different funds.

Allowing employees to nominate their choice of funds is but one step in enabling them to manage their own resources as they see fit. No doubt they will seek to maximise their retirement income, and they may decide to do this by consolidating all their contributions towards their retirement into one fund. That is an absolutely vital and necessary initiative that is incorporated in the bill.

Whilst the government is hailing this initiative as a benefit for small businesses, many employers have indicated that they are uneasy about how this change will affect them and fear it could lead to increased management and administration costs. I have had several visits to my office from managers and proprietors of small businesses especially, and they are very concerned at the greater involvement this whole procedure will mean through advising their employees and the book work involved.

There are three basic options that employers will be in a position to offer their employees under this bill: firstly, a limited choice; secondly, employers will negotiate the superannuation fund issue via workplace agreements; or, thirdly, an unlimited choice. I want to draw to the attention of the House an article which appeared in the Financial Review late December last year. It reported that:

. . . [a] survey of 100 employers found that most small firms were concerned that the federal government's members' choice policy could lead to a blow-out in business costs.

According to the survey, this meant restricting the choices offered to employees to a fund nominated in a workplace agreement or to a menu of four funds.

Employers said that simplicity of administration, management costs and service support were the most important factors to determine the types of funds they would offer employees.

Another survey conducted in January this year highlighted some concerns from Australian companies regarding the introduction of this bill, with most companies believing that choice would necessarily and no doubt involve more administration costs and fewer benefits for employees. The Executive Chairman of Industry Funds Services, Mr Garry Weaven, believes there is `not a ghost of a chance' of more than 10 per cent of employers complying with the legislation. He says that it involves an outrageous amount of red tape on questions such as when is a default fund not a default fund as well as an onerous level of record keeping by employers.

This bill as it stands, without an analysis of the effects of the change and without a well-constructed, fair education campaign, may prove to be the cause of unnecessary uncertainty and confusion for all parties involved, employees and employers. The opportunity to shop around for the appropriate superannuation fund and the decision as to which retirement savings account or fund to choose will no doubt prove to be a lot more difficult than anticipated by the government.

Most employees now have almost no say over the fund into which their superannuation is paid. In fact, the greatest proportion of people have their compulsory super paid into their employers' fund or into an industry fund. If the performance or investment strategy adopted by that fund is not suitable to the employee's individual preferences, there is usually nothing the employee can do about it.

Surveys indicate that most members would opt not to change superannuation funds if given the opportunity but that they would like to have this option available to them. Many small business employees are unsure and uneasy of the proposed expansion of member choice, and many have suggested to me that its introduction may be fraught with problems.

Not many employees are fully aware of the benefits, the entitlements and the risks associated with investing in funds. The member choice policy can be considered a good step in the freedom of the individual. However, some industry sources have expressed, as I said earlier, concern that members might not make wise choices through lack of understanding or through lack of sufficient information.

A recent UK Office of Fair Trading pensions inquiry determined there were approximately 570,000 cases of mis-selling in the UK and a great deal of money then had to be found for compensation. Employees were enticed and persuaded to move to personal pension schemes that were often against their own interests through lack of understanding. The federal government's form of choice can be improved, I believe, to prevent such an outcome by the establishment of a proper default fund, real employee choice and effective consumer protection.

Concern has also been expressed by members of the superannuation industry who fear that this new deal will result in an increase of costs and that the individual members of funds would not receive any net benefit. It has also been suggested that this change could transform superannuation into a user-pays system, with the added fees and charges not unlike those adopted and used by the banking sector quite extensively.

Member choice will take access to bulk membership from employers away from super funds. This could leave employees with two choices: firstly, a no-frills super fund which does not provide insurance, quarterly reporting, access to investor help lines or a choice of investor options or, secondly, a fund with those added benefits at an obviously added cost.

Funds would no doubt increase costs to make up for revenue lost as a result of a new system of administration procedures, increased marketing expense and the costs associated with investors switching funds. Employees need to be targeted as part of a major education campaign to inform about superannuation and associated investment matters. It is fair to say that even those who are well educated and erudite will find the superannuation process a little too confusing to fully grasp and comprehend. I suggest that we should spare a thought for the nearly 50 per cent of employees with lower literacy and numeracy skills who undoubtedly will get lost in the process.

I am especially concerned about the hundreds of thousands of people from non-English speaking backgrounds who have difficulty conversing in English and/or reading in English and who may make some major miscalculations through misunderstanding the options. I am pleased to see the Minister for Immigration and Multicultural Affairs (Mr Ruddock) is at the table. I am sure that he will press for the greatest possible information to be put through the ethnic media, whether it be newspapers, radio or television. It needs to be well sourced, because I fear very, very much for those people from non-English speaking backgrounds who have problems conversing and reading in English.

I note that the government wants to implement the bill on 1 July 1998. I fear that there may not be enough time. However, I urge the government to ensure that everything possible is done, particularly for those people of non-English speaking background, to help people to fully comprehend what this means and how this will impact on them. I will not vote against the bill. However, as I said earlier, I urge the government to ensure that red tape is reduced to the minimum possible and that a widespread educational and information program is undertaken as soon as possible to guarantee that employees are well informed about the procedures and the options so that no-one is disadvantaged.